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Exam 7: Inventories

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Question 51

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The following data were taken from Bowman Inc. Determine the inventory turnover ratio and the number of days' sales in inventory for Bowman Inc. Round to two decimal places. Inventory turnover = Cost of merchandise sold / Average inventory Inventory turnover = 894,000 / ((78,000 + 92,000)/2) Inventory turnover = 894,000 / 85,000 Inventory turnover = 10.52

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Number of days' sales in inventory = Ave...

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Question 52

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Most large companies will use only one inventory costing methods for all of its different segments.

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Question 53

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The following data were taken from the annual reports of Jong Inc., a manufacturer of fireworks, and Hobson Inc., a manufacturer of computers. (a) Determine the (1) inventory turnover and (2) number of day's sales in inventory for Jong and Hobson. Round your answer to two decimal places. (b) How would you expect these measures to compare between the companies? Why?

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

All of the following are reasons to use an estimated method of costing inventory except:

The lower of cost or market is a method of inventory valuation.

If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?

The average cost inventory method is the rarely used with a perpetual inventory system.

During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

Use of the retail inventory method requires taking a physical count of inventory.

Three identical units of Item Magnesium XP are purchased during May, as shown below. Assume that two units are sold on May 23 for $313. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

Inventory errors, if not discovered, will self-correct in two years.

Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

Under the _________ inventory method, accounting records maintain a continuously updated inventory value.

Assume that three identical units of merchandise are purchased during October, as follows: Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross profit, and Ending Inventory under the FIFO method.

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are in the possession of the consignor.

While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement?

Damaged merchandise that can be sold only at prices below cost should be valued at

In the retail inventory method, the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the good sold.